EDF Talks Global Climate

A new era of climate leadership: Mexico, Canada, and the U.S. announced major joint commitments on climate and clean energy on June 29, 2016. Image Source: Presidencia de la República Mexicana

Last week’s vote by the British to leave the European Union has triggered a crisis in political leadership, thrown financial markets into turmoil and prompted eulogies for the European project – even as the ultimate consequences of the vote remain uncertain.

Against that backdrop, a bit of good news may be welcome. And it comes from an unlikely quarter: climate action.

That may sound surprising at first since climate change was hardly a high-profile issue in the Brexit campaign. Voting on the referendum reflected concerns about inequality, immigration, globalization, multiculturalism and an out-of-touch political elite.

Even so, the prospect of the United Kingdom’s departure has raised concerns about impacts on climate and energy policy, including possible delays in finalizing the EU’s 2030 emissions target.

But whatever the implications may be for Britain and the EU, one thing is clear: Brexit can’t derail the overwhelming global momentum on climate action that produced the Paris Agreement.

The Paris Agreement: Strength in numbers

A British exit from the EU would not have any effect on the formal architecture of the agreement, which was approved last December by more than 190 countries and has been signed by 177 – including each of the EU member states.

Given that overwhelming support, the agreement may very well enter into force this year – something that will happen once at least 55 countries representing 55 percent of global emissions formally join the agreement.

To date, 50 countries representing more than 53 percent of global emissions have formally joined or committed to join the agreement this year — closing in on the threshold of 55 countries and 55 percent of emissions needed for the agreement to enter into force. As a result, the agreement may well enter into force as soon as this year, even without the EU (which was not expected to join the agreement this year in any case).

This signals a remarkable shift. A decade ago, Europe was the world’s indispensable leader on climate action – and even temporary uncertainty about the pace of progress in the EU would have had repercussions around the globe.

The Paris Agreement, however, was the culmination of a paradigm shift away from a model of “top-down” climate action concentrated in a handful of countries, and toward more a more decentralized and inclusive approach.

As climate action has become much more broad-based, it has also become more resilient.

Climate leadership beyond the EU

That is not to say that leadership on climate from both the U.K. and the EU is not vital; it is, and will continue to be. Taken as a whole, Europe is still the world’s third-largest emitter. It remains a powerful and valuable voice for ambition.

Fortunately, political support for climate action in the region remains high, with 60 percent of Europeans saying global warming is already harming people around the world.

But we are long past the days when climate progress depended on one bloc of countries. Just consider this:

The leaders of the three North American countries met today to announce greater cooperation on climate change – including major new commitments on clean energy and on methane emissions from oil and gas.

Under the leadership of President Obama, the United States is now a global leader on climate action, with U.S. emissions in 2014 at 9 percent below their 2005 level, and an ambitious target of reducing emissions between 26 and 28 percent by 2025, relative to 2005.

President Xi Jinping of China has made tackling climate change a priority, with a commitment to ratify the Paris Agreement this year, a pledge to peak China’s emissions by 2030, if not before; and a plan to institute a nationwide emission trading program as early as next year.

The unprecedented bilateral cooperation between the U.S. and China, culminating in the joint announcements on climate change made by Presidents Xi and Obama in November 2014 and again in September 2015, were a crucial step in laying the foundation for success in Paris.

Brazil – although currently engulfed in political turmoil of its own – has reduced emissions over the past decade more than any other country, thanks to the enormous success of its Amazon states in curbing tropical deforestation.

India, where the moral imperative of poverty alleviation remains paramount, is committing to renewable energy and experimenting with new models of low-carbon development.

Other factors driving momentum

Underlying these country-level shifts are more fundamental drivers. The impacts of climate change are becoming increasingly more visible, in record temperatures and extreme weather events.

A clean energy revolution is underway: Wind power is competitive with coal in much of the world even without subsidies, the cost of solar panels has dropped 75 percent in less than a decade and new technologies for how we use and store energy more efficiently are transforming markets.

Meanwhile, leading companies are stepping up by reducing their carbon footprints, greening their supply chains and calling for policies such as a price on carbon.

In short, leaders around the world have come to the realization that the path to shared global prosperity is a low-carbon path.

That makes the politics of climate action more resilient now than they ever have been before. And that is good news to keep in mind in these uncertain days.

The results of California and Quebec’s latest carbon auction show that an ongoing lawsuit challenging the cap-and-trade program’s allowance auctions is likely impacting market dynamics, but that California’s market is proving resilient, in part due to the strength of its design.

The May 18 auction, the second of 2016, offered 67,675,951 current vintage allowances (available for 2016 compliance) and sold only 7,260,000. Just under one million of the just over ten million future vintage allowances (available for use in 2019 and after) were sold. The unsold California state allowances will go back to the auction holding account and will not be available for sale until the auction clears above the floor price for two consecutive auctions, a critical regulatory feature that removes unexpected, excess supply from the market and provides further price support. Utility allowances that were consigned to auction and did not sell will be offered again for sale at the next auction.

Increased attention to the litigation brought by the California Chamber of Commerce and the Morning Star Packing Co. et al., as well as higher participation in the secondary market, caused lower demand for allowances in the May auction. Secondary market prices have traded as low as 44 cents below the floor price in the last couple of months. But the real story is the positive and stabilizing impact of the floor price itself.

Other markets without such a strong floor price have seen price drops that are much more dramatic when the market receives a disturbance. But in California, the volume of trades on the secondary market has been higher than usual, showing that some entities are taking the opportunity to buy allowances at a discount.

It's worth noting that these results in no way impact the overall performance of California's program, which will continue to incentivize carbon pollution reductions.

EDF’s take on the litigation of the cap-and-trade auction program’s legality

At this critical juncture, opponents continue to litigate and challenge carbon auctions, an integral component of the cap-and-trade program that promotes equity and a healthy carbon market.

We are confident, however, that California courts will ultimately confirm the Legislature’s broad grant of authority to the California Air Resources Board (ARB) to design effective programs to address the imminent threat of climate change, and will reject the claim that auctioning valuable, marketable emission allowance constitutes an unconstitutional “tax.”

In supplemental briefings submitted May 23 to the California court, ARB argued persuasively that, even if the intermediate appellate court were to find a legal flaw in the auction, there would be no valid legal justification for disrupting the cap-and-trade program including its auction components while the state Supreme Court considers the case or ARB develops a suitable solution. This outcome is well-grounded in legal precedent affirming courts’ obligation to avoid remedies that imperil public health and welfare or cause needless disruption to public and private interests that rely on the current status quo.

California’s ability to continue utilizing a cap-and-trade program designed to meet its needs through 2020 and beyond is essential to California and to global climate momentum.

While EDF has a high degree of confidence that the lower court decision rejecting the challengers’ claims will be upheld, even if it is not, settled judicial procedures should help to ensure that the environmentally and economically important cap-and-trade program continues with minimal disruption.

California’s ability to continue utilizing a cap-and-trade program that is designed to best meet the state’s needs through 2020 and beyond is essential not just to California itself, but also to global climate momentum.

There is every reason for confidence both in the legality of CARB’s choice to auction allowances and in the commitment of California’s leaders to deliver on California’s climate goals. We expect that a resilient cap-and-trade program will remain at the heart of the state’s increasingly ambitious and effective climate strategy long into the future.

Thousands of words have been written this week about a new efficiency standard recommended by a technical group of the International Civil Aviation Organization (ICAO). The standard, if adopted by ICAO’s executive council, is intended to require aircraft manufacturers to start producing more efficient airplanes.

But one picture makes clear that even with the new efficiency standard, international aviation still has a huge gap between its anticipated emissions and its own environmental goals.

Source: Environmental Defense Fund

The top of the upsloping curve shows how international aviation’s emissions are slated to skyrocket in coming years.

The horizontal red line toward the bottom, labeled “Emissions Cap at 2020 levels,”shows the industry’s own goal of “carbon-neutral growth from 2020.” ICAO has also embraced this goal.

The area below the top of the curve and above the horizontal red line at 2020 is the total amount of emissions that international aviation must deal with to meet this goal.

This week, ICAO’s Committee on Aviation Environmental Protection (CAEP) recommended that ICAO’s Executive Council adopt, at its next meeting in June, a carbon dioxide efficiency standard for aircraft, akin to a fuel economy standard for cars. That’s a step in the right direction.

But how big a slice will this new standard take out of international aviation’s skyrocketing emissions? At best, that’s the blue sliver shown in this picture. (The red sliver aviation hopes to cut through “operational improvements” like better air traffic control.)

That leaves a huge “Emissions Gap” – shown in green – about 7.8 billion tonnes of carbon pollution that international aviation will have to deal with to meet its own climate goals, let alone the kinds of reductions that will be needed if the sector is to bring emissions down to the dashed red arrow, along the lines of the Paris Climate Agreement.

The industry has a long way to go to make carbon pollution go down, not up.

ICAO’s pledged to finalize, this September, a global market-based measure (MBM) with offsetting to drive industry’s net emissions down to the 2020 cap. President Obama has made climate action a centerpiece of his legacy. Success in cutting aviation emissions could help – but that will only happen if the Obama administration takes the lead in the intensive talks now underway in ICAO.

The picture is clear: While the aircraft standard will help, the Administration now needs to keep its eyes on the prize – the ICAO decision on the market-based measure in September.

If international aviation were a country, it would be a top ten emitter of carbon dioxide (CO2), on par with Germany or the United Kingdom. And it’s expected to grow enormously: with more than 50,000 new large aircraft slated to take to the skies, its emissions are expected to triple or quadruple by 2040.

In Paris in December 2015, the world hailed the success of the UN Framework Convention on Climate Change (UNFCCC) in adopting the first broadly applicable instrument to start driving carbon pollution down, with a goal of limiting warming to 1.5-2° C.

But Paris didn’t cover pollution from flights between countries. Why not? Because in 1997, aviation lobbied for, and got, the UNFCCC to defer these to another UN body, the International Civil Aviation Organization (ICAO).

ICAO talked about the issue for fifteen years until 2013, when, with Europe poised to enforce a cap on emissions of inbound/outbound flights, ICAO pledged to act by 2016. Quiet talks are now underway on:

An ICAO CO2 standard for aircraft – akin to a miles-per-gallon standard for cars. In Montreal next week, possibly as early as Monday, February 8, 2016, a technical group is expected to agree a recommendation for this standard.

A cap on international aviation’s total CO2 emissions at 2020 levels. ICAO is slated to vote in September 2016, on the cap and a market-based measure (MBM) to help airlines implement it.

Here’s what’s at stake:

Source: Environmental Defense Fund

Without any new rules, international aviation’s carbon pollution is expected to skyrocket (top red line). Better air traffic control can trim some pollution (top red wedge). An ambitious CO2 standard would mean fewer emissions per passenger-mile, further slowing the sector’s emissions growth (blue wedge). But because the industry’s overall emissions are expected to far outstrip these per-trip efficiency gains, there’s still a huge gap (green triangle) – at least 6-8 billion tonnes – to get to the goal of an emissions cap at 2020 levels (red horizontal line), or even more ambitious goals along the lines of the Paris agreement (red dashed line).

The real prize is the market-based measure to cap aviation emissions and drive pollution down, not up.

The United Nations climate agreement in Paris, and the intense negotiations leading up to it, were a breakthrough in a number of important ways.

First of all, the agreement represents the coming of age of climate diplomacy. It was evident from the beginning that French Foreign Minister Laurent Fabius, who chaired the talks, had the full trust and confidence of the room.

He artfully identified a zone of agreement among 196 delegations that gave nearly everyone something they wanted without crossing red lines.

The agreement was also the culmination of months of bilateral diplomacy at the highest levels, most visibly between the U.S. and China. The direct involvement of President Obama and other world leaders was critical to success – and shows a strategic savvy and leader-level involvement that we haven’t seen in past climate talks.

But it’s the language of the agreement itself, and the broad backing it received, that makes it such a big deal. It means that we now have a chance – not a guarantee, but a chance – to put the world on a healthier path.

The U.S. Clean Power Plan – the U.S. Environmental Protection Agency program to cut carbon pollution from the country's largest emitting sector, electric generating stations – is here to stay. Image: cropped photo from Flickr/ USCapitol.

It’s always hard to interpret political maneuvering in other countries. Governments resign, coalitions form, legislation means something other than what it seems to mean. So in the coming weeks, when newspapers around the world run headlines saying “U.S. Congress Votes to Overturn Clean Power Plan,” their readers may be forgiven for some confusion about America’s position coming into the Paris climate talks.

The first and most important thing to understand is that the Clean Power Plan – the U.S. Environmental Protection Agency program to cut carbon pollution from our largest emitting sector, electric generating stations – is here to stay. Bills to “block” the Plan may pass the U.S. Senate and House of Representatives, but they will go no further. That is because those bills cannot become law unless President Obama signs them. He has made it abundantly clear that he won’t agree to dismantle his leading climate initiative.